Stabilizing neighborhoods by investing in Detroit Land Bank

What do you do with thousands of vacant properties in Detroit? Redevelop one at a time. Or demolish them.

The Detroit Land Bank, working with $20 million in Neighborhood Stabilization Program funds, is patiently carrying out the Detroit Future City plan by remodeling houses and demolishing others. It may seem relatively insignificant, but one restored house or demolished property may be the key to stabilizing a middle class neighborhood in the city.

That, perhaps, is the most remarkable aspect of the organization’s mission: shoring up the middle class in Detroit. The Land Bank collaborated with homeowner associations in the Boston-Edison and East English Village neighborhoods, which are populated by middle-class households. A vacant home or lot there significantly lowers property values and may sway a prospective buyer from purchasing there.

"We're targeting middle class, middle income, middle and moderate families for neighborhood stabilization," says Juanita Jones, managing director of Operations for the Land Bank. "We did that because the city was already serving low and moderate income families. We wanted to take a leveraged approach, and for a small amount of money, see if we can figure out a way to attract families that were of means and have the ability to move to Southfield or Farmington Hills, or Novi or whatever -- let's give them choices inside the city of Detroit."

Middle class families, she says, can live anywhere they want. The question is whether Detroit can attract them. "Our approach on rehab was different than affordable housing. We approach everything from the perspective that these are historic assets. Let’s do justice to that. Let's keep what we can keep, restore what we need to restore, and let's also do it so it's a sustainable product."

The Land Bank is renovating homes in Boston-Edison with the Detroit Central Christian Community Development Corporation. Lisa Johanon executive director of the CDC, says the Land Bank has been "a wonderful partner," in terms of bringing Neighborhood Stabilization Program funds into the community, and having a vision for stabilizing the area. "We need to stabilize the middle class and bring life and vitality back here," she says.

"Juanita Jones did what I did: fall in love with every house that they renovated," Johanon says. "They went the extra mile in terms of putting amenities into the houses that were top notch, making them incredibly desirable, and in the process bringing values up in the neighborhood that we haven't seen." There still are 11 properties owned by the Land Bank in Boston-Edison that the CDC would like to co-develop, Johanon says.

Across town, William Barlage, president of the East English Village Neighborhood Association, has been working with the Land Bank since its inception. "It was a bumpy road at first just because it was new," he says. It was difficult for many to grasp the concept of a land bank, but the agency has helped redevelop 14 homes in East English Village, with 24 yet to be completed. That investment has helped increase the resale value of the residential properties in the area.

"You have to start somewhere," Barlage says. "You have two very strong neighborhoods, with strong homeowner associations, was definitely the right move. We were able to facilitate the information, the strategy, the home tours, and the overall marketing of the neighborhood via real estate agents."

Land banks were established in Michigan through PA 258, the "Land Bank Fast Track Act," passed in 2003. The law enables state and local governments to create a land bank authority to return abandoned property back to the tax rolls and serve as a catalyst to foster redevelopment.

Detroit has nearly 80,000 vacant properties in its 139 square miles. The Land Bank maintains 7,900 abandoned properties in the city, and is about to begin a $52.3 million blight elimination and redevelopment program funded through the Michigan State Housing Authority (MSHDA).

The definition of success for this project is simple: "We moved the market," Jones says. The first property purchased by the Land Bank in Boston-Edison cost $29,000. The last property sold in the neighborhood was $145,000. "That wasn't going to happen with the private market," she says. "They were not going to come in and put the kind of money in that those units require to make them marketable, to make them sellable."

In East English Village, the Land Bank bought properties for under $7,000 and moved values to between $85,000 and $90,000. Within 16 months, 11 houses were renovated and nearly all sold.

"That's what you need driving this thing," Jones says. "The public dollars are limited. We can only do what we can do. Neighborhood stabilization was a catalyst for getting this done. Now, we're right where we want to be because private developers are coming to us and saying we want to help finish what you started. We're really sitting in a catbird seat to be at this point talking about strong neighborhoods. We're not talking about decline any more." It's a model that can be applied to other middle class neighborhoods, but only with initial public funding, she says.

When Neighborhood Stabilization Program funding ends in the spring, the Land Bank will shift its priorities to demolition in other neighborhoods. "We're engaging private developers and saying, this is where we're going, this is where the investment is going to be made," Jones says. "We want you to follow us and make your investment in that same area, instead of everyone operating all over the city."

The Detroit Land Bank may have done its job in the two neighborhoods it has worked in, but in the end, the market isn't quite there yet, Johanon says.

"You can talk the talk, but it’s not market rate. There’s nothing market rate in the city yet, not even Boston-Edison. We can brag and say that we’re at $145,000 in values, but fact is, double that was put into the house," Johanon says. "I think we're still talking theory, although it's a reality we'd all like to see."